SVB is Now In the Hands of the FDIC

CompOrange04GT

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So for us non money saavy people... What does this mean?

I read as.. " Its insured money by the government" which means good luck getting yhour money
 

Weather Man

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Banks with tech exposure are getting hammered.

Shares of PacWest Bancorp (PACW -33.32%), Signature Bank (SBNY -22.30%), and First Republic Bank (FRC -17.25%) are down 33%, 24%, and 23%, respectively, as of as of 1:31 p.m. ET Friday, with trading of all three tickers halted at one point this morning in an effort to curb runaway selling.
 

VegasMichael

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The other issue is that many people/companies/entities keep more cash in a bank account than is insured by the FDIC.

From the link below:

"Roughly 87% of Silicon Valley Bank's deposits were uninsured as of December 2022, according to its annual report. Uninsured depositors will receive an advance dividend within the next week and a receivership certificate for the remaining out of their uninsured funds, the FDIC said. It could make future dividend payments as it sells Silicon Valley Bank's assets."

 

Weather Man

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Pretty abject lesson on why over concentration in any single company is a really bad idea.
 

jrandy

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So for us non money saavy people... What does this mean?

I read as.. " Its insured money by the government" which means good luck getting yhour money

They have plenty of money, it's mainly a liquidity issue due to terrible investing on their end.

Here's a great write up pulled from Reddit:

Answer: at an ELI5 level, Silicon Valley Bank (SVB) is a bank that focuses on providing services to startups and entrepreneurs. Many companies use it to hold funds that they receive from venture capitalists.

In 2021, the market was soaring and startups were getting tons of money. They put this money in SVB, which went from holding $61.76bn at the end of 2019 to $189.20bn at the end of 2021.

Banks normally make money by loaning out a portion of the money they hold, but SVB was getting so much money that they couldn't loan out fast enough. So instead, they bought a bunch of long term investments, the majority of which will mature in 10 years.

This would be okay except that when the fed started raising interest rates last year, the value of these long term assets fell hard. Simultaneously, tech and startups also started to struggle with the rate hikes (see: all the big layoffs) and pull from their deposits more quickly. By the end of 2022 deposits were down to $161 billion.

Yesterday SVB announced a fire sale: they sold pretty much everything they could sell in order to raise cash and balance out all those long term assets and improve financial health metrics. They sold over 21 billion worth of investments and are trying to raise 3 billion more.

Investors and Venture Capitalists were shocked and concerned about why they had to do this and why they had to do it now. Some VCs told their startups to pull their money out of SVB or to keep no more than 250k in the bank (which is how much is insured by the FDIC).

This has raised concerns of starting a run on the bank. SVB is theoretically fine right now, but if all of these startups try to pull their money out they won't be.
 

2003RedfireVert

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After a week of watching the Premiere League 9 ball tournament I came in expecting a discussion on Shane Van Boening. This is way less interesting. Lol
Yeah….definitely an dud of a topic but with all the financial/tech stuff happening just seems like this stuff is going to be happening more and more.

The funny thing is, all these folks voted for all this. They should be happy their sh*t is failing and people are getting laid off.
 

MG0h3

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They have plenty of money, it's mainly a liquidity issue due to terrible investing on their end.

Here's a great write up pulled from Reddit:

Answer: at an ELI5 level, Silicon Valley Bank (SVB) is a bank that focuses on providing services to startups and entrepreneurs. Many companies use it to hold funds that they receive from venture capitalists.

In 2021, the market was soaring and startups were getting tons of money. They put this money in SVB, which went from holding $61.76bn at the end of 2019 to $189.20bn at the end of 2021.

Banks normally make money by loaning out a portion of the money they hold, but SVB was getting so much money that they couldn't loan out fast enough. So instead, they bought a bunch of long term investments, the majority of which will mature in 10 years.

This would be okay except that when the fed started raising interest rates last year, the value of these long term assets fell hard. Simultaneously, tech and startups also started to struggle with the rate hikes (see: all the big layoffs) and pull from their deposits more quickly. By the end of 2022 deposits were down to $161 billion.

Yesterday SVB announced a fire sale: they sold pretty much everything they could sell in order to raise cash and balance out all those long term assets and improve financial health metrics. They sold over 21 billion worth of investments and are trying to raise 3 billion more.

Investors and Venture Capitalists were shocked and concerned about why they had to do this and why they had to do it now. Some VCs told their startups to pull their money out of SVB or to keep no more than 250k in the bank (which is how much is insured by the FDIC).

This has raised concerns of starting a run on the bank. SVB is theoretically fine right now, but if all of these startups try to pull their money out they won't be.

Why would the FDIC step in if they are liquid though?


Sent from my iPhone using the svtperformance.com mobile app
 

Weather Man

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We'll see how well this ages.

In the light of the liquidity crisis at Silicon Valley Bank, former Federal Reserve economist Bill Nelson said Friday that the banking system is "well capitalized" despite pressured caused by higher interest rates.

In an interview with CNBC, Nelson argued that the issues at Silicon Valley Bank is not a "significant financial system problem" and the turmoil it has caused should not impact Fed's decision-making process related to interest rate hikes.
 

Lambeau

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After a week of watching the Premiere League 9 ball tournament I came in expecting a discussion on Shane Van Boening. This is way less interesting. Lol

I'm an Allison Fisher fan myself...

1678487757313.jpeg
 

L8APEX

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monty-python-dead-parrot.gif



There are canaries in coal mines.

But Norwegian Blue Parrotts in financial markets.

The ripples are going to start hitting fast. Not just secondaries but tertiary and more.
What happens when they can't do "too big to fail 2.0, and fund Ukraine as long as it takes" At the same time?
Jenga anyone?
 
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